Use the Information for the Question(s)below

question 49

Multiple Choice

Use the information for the question(s) below.
You own your own firm and you need to raise $50 million to fund an expansion.Following the expansion,your firm will be worth $75 million in its unlevered form.You want to go ahead with the expansion,but you are concerned that you may not be able to maintain ownership of over 50% of your firm's equity.In other words,you are concerned that if you use equity to finance the expansion,you may lose control of your firm.
-Assume that capital markets are perfect,you issue $30 million in new debt,and you issue $20 million in new equity.You ownership stake in the firm following these new issues of debt and equity is closest to:

• A)58%
• B)50%
• C)33%
• D)55%

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Definitions:

Hierarchy of Effects

A sequence of stages a consumer goes through, from awareness to knowledge, liking, preference, conviction, and finally purchase of a product or service.

Last Stage

The final phase in a process, such as in product development or the life cycle of a product in the market.

Interest

A charge for borrowing money, typically a percentage of the borrowed amount, or intense curiosity or concern in something.

Awareness

The degree of consumer recognition of a product, brand, or issue, often as a result of marketing efforts.